“Megan had five children living at home, the oldest was 13 years old and two of them were under 18 months of age. Although she had re-partnered, the relationship had not lasted and she was bringing up her children alone. Her previous experiences of employment have made her anxious about leaving her children in childcare. She also had strong views about leaving young children with a child minder or in any other kind of private provision. When Megan had been in work she had not felt better off. She attended a work focused interview every six months although she would not consider entering work until her children were older and she greatly resented the pressure she felt she has been put under to do so. ‘I’ve told them I wont leave them with a childminder…They’re my children. I had them. I should obviously look after them and I understand yes, that I should be working and I shouldn’t be claiming money from the Government and what have you, but I will eventually go back to work and I’ll pay back, in my eyes, what I’ve had from them.’ She also feels that there is a lot of stigma attached to attending Jobcentre Plus for mothers like her. ‘I don’t like going because I don’t like going down to the job centre because all the benefits and stuff are all in the job centre now and I mean, obviously there’s people there…and it’s just the way people look at you when you’re walking in…Like something that came off the bottom of their shoes, some of them sort of look at you like that, sort of thing. But, obviously, they don’t see the full picture. They only see half of the picture.’

Case study taken from Work and wellbeing over time: lone mothers and their children, DWP Research Report No.536, Ridge and Millar (2008).

“In-work poverty has become the major child poverty challenge of recent years, with no signs of any real progress”

Helen Barnard, Joseph Rowntree Foundation, 2011

When I found the first quote, above, about Megan, I could hear in my head the sort of reactions it might provoke:

“Why would you have five kids if you were living on benefits?”

“Why should the state subsidise large, workless families?”

“Of course mums should be able to stay with their kids until they’re at school”

“This is why we need to make work pay”

In the next two blogs, I’ll look at some of the factors that the current Government has pledged to tackle as “the causes of poverty”, both of which are illustrated in Megan’s case: worklessness and family break-down.

The underclass

One way of thinking about poverty is that socially excluded people are responsible for their own marginalisation. That it has a strong moral element.

“Fundamental to this way of thinking is that poverty is caused primarily by inadequate parenting and/or family breakdown,” explains the Joseph Rowntree Foundation (PDF). “Also that many materially deprived parents are dislocated from ‘mainstream’ society and its values, in particular the value of participation in the labour force and of behaving in a socially responsible manner.”

Is this a valid discourse? How much are people to blame for their own circumstances?

Breakdown Britain?

The Centre for Social Justice, a thinktank founded by Conservative MP Iain Duncan Smith (prior to his appointment as Work & Pensions Secretary) defines the “five pathways to poverty” as family breakdown, economic dependency and worklessness, educational failure, addiction and personal indebtedness.

This thinking has been highly influential on the current Government for whom a mantra is that everyone who can work, should work.

“While income is important we should be clear that the source of that income can have very different effects,” Iain Duncan Smith told students at the LSE in December 2011. “Income through benefits maintains people on a low income, whereas income gained through work can transform lives.”

The current strategy on child poverty, informed by IDS’ work, builds on this thinking (IDS famously said that British people not taking up jobs were guilty of a “sin”):

“First, we must ensure that families can work themselves out of poverty”, it states. “If they do the right thing we will make sure the system makes work pay.”

The strategy is about “strengthening families, encouraging responsibility, promoting work, guaranteeing fairness and providing support to the most vulnerable.”

Taking up the advice of IDS and Labour MP Frank Field, it states that the best way to improve the life chances of children in lower income families is “to invest in the public services which they use, and to monitor the progress of those children more closely.”

This seems to suggest that, rather than put money directly into the pockets of poor parents, the role of the State is to assume greater responsibility for the children of poor parents, pumping it into the services it believes will improve their life chances.

So is work the answer?

Certainly, the facts about worklessness in the UK are stark:

Around 1.9 million children in the UK grow up in homes where no-one works – roughly one in six

As a proportion, this is higher than in almost any other European Union country

For a child in a workless household, the risk of being in relative poverty (58%) is far higher than the risk for children in families where all adults work (8%)

Furthermore:

65% of all parents in poverty who enter work move out of poverty (46% of those who enter part-time work and 80% of those who enter full-time work)

The Government has pledged to tackle worklessness by:

Introducing the Universal Credit: a single benefit paid monthly that will replace six “complex and interacting benefits”. Benefits will only be withdrawn as earnings increase in a move to tackle disincentives to work. The Government claims that the design of the Universal Credit will enable most families with children who have a parent in full time employment (at least 35 hours a week) to have an income that lifts them out of poverty. The same should apply for lone parents who work at least 24 hours a week

Lone parents in receipt of benefits must claim Jobseeker’s Allowance, which requires them to undertake job searches, when their children reach five (previously 16)

Providing free early education for 3 and 4 year olds and “disadvantaged” 2 year olds (enabling parents to go out to work)

Other elements of its child poverty strategy include a focus on early years education and reducing educational under-performance.

A lukewarm reaction

The reaction of poverty campaigners to the strategy has been tepid at best.

CPAG said that there was “much to commend” in the approach: “Indeed, it seems plausible that if successful policies could be implemented in these areas, over the longer term they would at least contribute to reducing inequality and child poverty, and eventually increase social mobility”.

However it also makes the point that, under the previous government, moving parents into work was “not the most significant driver of Labour’s achievements on child poverty”. Tax credits and benefits, which rewarded low-paid work, made more of an impact.

It concludes: “If Labour could not make a child poverty strategy based on work alone successful when the economy was strong, the chance of success in the current environment of a double-dip recession, high unemployment, significant under-employment, stagnant median wages and a heavy household debt burden seems remote.”

The Joseph Rowntree Foundation has also expressed doubts. This is from its response to the publication of the child poverty strategy:

“The area that appears to be completely missing…is consideration of the type of work that parents enter and how this is linked to the nature of the labour market. In particular, we feel that there should be explicit reference to improving the quality, flexibility, sustainability and progression routes of the work that parents enter. It is highly unlikely that the eradication of child poverty can be achieved without addressing this issue, unless income transfers on a very large scale were to be implemented.”

The response also notes that “half the intergenerational transition of income occurs through education” – the cognitive skills that are highly rewarded in the labour market are not evenly achieved by children from less affluent families (I’ll look at this in a later blog).

What do the economists say?

Analysis by the Institute for Fiscal Studies, a thinktank that must be the bane of the coalition come Budget time, suggests that the Govenment’s faith in employment as the key to solving child poverty is misplaced.

It has estimated that (PDF) the Government’s changes to tax and benefit polices will actually increase relative child poverty by 200,000 in both 2015-16 and 2020-21 and increase absolute child poverty by 200,000 in 2015-2016 and by 300,000 in 2020-2021.

On its own, Universal Credit should reduce relative poverty by 450,000 children, it estimates, but this reduction is “more than offset by the poverty-increasing impact of the government’s other changes to personal taxes and state benefits.” In particular, benefits will now increase in line with the consumer price index (CPI) measure of inflation (which does not include housing costs) rather than one derived from the retail price index (RPI).

The IFS concludes: “Governments cannot rely on higher employment and earnings to reduce relative measures of poverty. The results therefore suggest that there can be almost no chance of eradicating child poverty, as defined in the Child Poverty Act, on current government policy… it is impossible to see how relative child poverty could fall by so much in the next 10 years without changes to the labour market and welfare policy, and an increase in the amount of redistribution performed by the tax and benefit system, both to an extent never before seen in the UK.”

Perhaps the key phrase here is “as defined in the Child Poverty Act”. What the IFS seems to cast doubt on is the targets the Government is committed to achieving and, possibly, whether it is possible to reduce relative poverty through employment. An issue here is that higher employment and average earnings tend to raise the median income (and hence the relative poverty line) by more than they raise the incomes of low-income families with dependent children.

The IFS’ suggestion is that the Government set itself “more realistic targets” for reducing child poverty.

Doing “the right thing”…but still poor

It can be easy to create a mental dividing line between those on benefits and those in work. In fact, more than 90 per cent of new housing benefit claims over the past two years have been made by employed people.

The JRF has argued that: “In-work poverty has become the major child poverty challenge of recent years, with no signs of any real progress”.

Sir Michael Marmot, professor of Epidemiology and Public Health and University College London, contributing to a CPAG report (PDF) has said that: “Much of the responsibility for redistribution needs to be placed with employers. High levels of in-work poverty are unacceptable.”

A few facts:

Five million workers earn less than the “living wage”, designed to provide a minimum acceptable standard of living. In London the current rate is £8.30 per hour. Outside of London the current rate is £7.20.

Recent reseach from the Department of Work and Pensions showed that households are lifted out of poverty when someone gets a job in 56% of cases, rising to 66% if it’s a full-time job.

More than half (57%) of children in poverty have someone in the household in paid work.

One third of families who move into work do not escape poverty, and a significant proportion of those that do end up back in poverty (PDF)

What kind of jobs are out there? I’ve taken the points below from a piece of work by The Work Foundation: The Hourglass and the Escalator (2011) (PDF)

For every vacancy there are six unemployed people (ONS Labour Market statistics, May 2012)

There is evidence that the labour market is gradually polarising into high quality and low quality jobs with middle occupations “hollowed out”. For example, managerial and professional occupations accounted for more than three-quarters of employment growth between 2001-2007 and continued to grow despite the recession. A quarter of a million jobs were created in low-wage sectors (personal service, sales, security, and cleaning) while there was a significant decline in middle-wage occupations such as the skilled trades and secretarial jobs.

Between 2001 and 2007 more than a quarter of a million jobs in secretarial and administration skills were lost

Demand for personal services such as childcare and social care has increased

During the recession, the employment rate for those with no qualifications fell by six percentage points: “It is likely that this much greater fall among those withno qualifications in part reflects the nature of increasing competition in the labour market for lower wage occupations.”

“A sizeable proportion of low-earners are finding themselves trapped at the bottom-end of the labour market and are unable to increase their earnings significantly even over a relatively long period”: One-third of those who were in the bottom ten per cent of earners in 2001/2002 remained there in 2008/2009; while more than 60 per cent who were in the bottom ten per cent remained within the bottom three deciles.

“State support is necessary precisely because our economy – the number of jobs available, and the range of salaries attached to them – does not accurately address or match the capabilities and needs of the population. As emerging economies continue to advance, this miserably divisive situation is likely to intensify.”

“The low-skilled, low-paid employment generally available to lone parents proves likely to be of real benefit only if it proves to be stable and to be a stepping stone to better long-term prospects – the exception rather than the rule, given that low-skilled and personal service jobs tend to be low paid, temporary and inherently unstable.”

They conclude: “It is important to also improve more generic skills associated with labour market awareness and developing social networks that may be lacking among the most disadvantaged due to prolonged unemployment or economic inactivity. Evidence suggests such skills are important in facilitating successful job searches, although there may be structural barriers preventing labour market progression (e.g. glass ceilings, discrimination, the importance of social and business networks) that improving skill and qualification levels may be insufficient to overcome.”

“While personal attributes and circumstances contribute significantly to determining the risk of recurrent poverty, they are overshadowed by structural factors that shape the opportunities for financial security offered by the labour market,” concluded Chris Goulden in 2010 in a paper for the JRF (Cycles of poverty, unemployment and low pay). “It follows that policies that encourage people to find work that pay little attention to the kind of jobs that are available are unlikely to secure a significant reduction in recurrent poverty or a sustained fall in the poverty rate.”

This is not to sound a note of hopelessness but it does serve to highlight the importance of considering the type of work available to those the current Government is urging to enter the labour force.

So, how can we ensure that the types of secure jobs offering the possibility of progression that offer a route out of poverty are available to all? I’ll explore this after looking at another “path to poverty”: family breakdown…

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